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Government Fort Worth-area PPE manufacturer in deal for domestic face mask production as...

Fort Worth-area PPE manufacturer in deal for domestic face mask production as industry makes shifts

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Fort Worth-area N95 mask manufacturing executive testifies about rebuff during House testimony

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Charlotte, North Carolina-based Premier Inc. (NASDAQ: PINC), a leading healthcare improvement company, and 15 leading health systems acquired a minority stake in North Richland Hills-based Prestige Ameritech, the largest domestic manufacturer of face masks, including N95 respirators and surgical masks.

Under the agreement, Premier members commit to purchase a portion of all face masks they use annually from Prestige Ameritech for up to six years, inclusive of a three-year renewal option.

The arrangement with Prestige Ameritech is part of Premier’s newly announced strategy to work with members to invest in domestic and geographically diverse suppliers of PPE and other medical equipment currently in shortage due to the COVID-19 pandemic.

In mid-May, a Prestige Ameritech executive testified in front of a congressional committee about how he tried to help the government increase the supply of the key N95 masks, but was rebuffed.

PPE products critical for the daily operations of health systems are overwhelmingly sourced overseas, with approximately 80 percent coming from China and Southeast Asia. The risks of this overreliance on Asia came into sharp focus as COVID-19 swept across the globe and these nations closed borders and prevented U.S. access to supplies, triggering widespread shortages of PPE needed to protect healthcare workers and patients.

In contrast, Prestige Ameritech represents a domestic supply chain, with production completed in the United States. Prestige also sells 100 percent of its products to U.S. customers.

“With past outbreaks such as SARS, H1N1 and Ebola, the nation talked about domestic manufacturing and expanding supply sources as the keys to preventing shortages, only to return to the same overleveraged overseas markets once the crisis was over,” said Premier President Michael J. Alkire. “This move is the latest step in our long-term commitment to changing the way we source critical products so that we never again experience shortages as a result of overreliance. Our economic prosperity can no longer be tied to things we buy – it must also come from things we make.”

“As COVID-19 proves, the United States is almost completely at the mercy of foreign nations for vital supplies,” said Dan Reese, Prestige Ameritech co-founder and CEO. “Diverse and on-shore manufacturing of critical healthcare products is clearly a national security issue. With this agreement, we have long-term, multi-year commitments that give us certainty and allow us to dedicate our resources to increase production. Not only does that help us today with COVID-19, but long-term commitments also create economies of scale for when we return to business as usual.”

Premier members participating in the initial investment include AdventHealth (Altamonte Springs, FL), Adventist Health (Roseville, CA), Advocate Aurora Health (Downers Grove, IL, and Milwaukee, WI), Ballad Health (Johnson City, TN), Banner Health (Phoenix, AZ), Baptist Health South Florida (Miami, FL), CommonSpirit Health (Chicago, IL), Genesis Health System (Davenport, IA), Henry Ford Health System (Detroit, MI), McLaren Health Care (Grand Blanc, MI), Riverside Health System (Newport News, VA), St. Luke’s University Health Network (Bethlehem, PA), Texas Health Resources (Arlington), Universal Health Services, Inc. (King of Prussia, PA) and University Hospitals (Cleveland, OH).

“These members are true innovators, as they are the first to step up and fund the long-term domestic manufacturing of healthcare products,” continued Alkire. “This agreement and the added domestic supply it enables would not be possible without their commitments. Each one deserves recognition for its leadership and for its work to bring supplies back home to America.”

Financial terms of the agreement were not disclosed.

Prestige Ameritech’s headquarters and 220,000 square foot manufacturing facility are located near Fort Worth.

Also on Tuesday, U.S. officials said are invoking a rarely used provision of American law that would shield companies from antitrust regulations to help the country from again running out of medical supplies in a pandemic.

The government began formal discussions Thursday with private industry representatives on a cooperative five-year agreement to ensure supplies of protective materials, medical equipment, medicine and vaccines.

The agreement would involve a provision of the Defense Production Act that has been used only twice before to enable competitive businesses and the government to discuss issues of price and supply without running afoul of antitrust regulations, said Joel Doolin, a senior official with the Federal Emergency Management Agency.

“Clearly it could have applications to what’s happening now, but because it’s a five-year look it’s intended so we can set up this relationship with industry, have those conversations and plan for the future,” said Doolin. He has a lead role in the effort as FEMA’s associate administrator for policy, program analysis and international affairs.

There was widespread recognition that U.S. supplies of critical equipment, much of which is now manufactured overseas, were insufficient at the outset of the COVID-19 outbreak.

U.S. hospitals as well as many private companies and even government agencies such as the Department of Veterans Affairs and states themselves struggled to acquire protective masks, gowns, face shields and other gear, often bidding against each other and driving up prices amid the shortage.

FEMA worked with businesses and other agencies to acquire tens of millions of N95 respirators, masks and other pieces of equipment from around the world and distribute them across the United States while President Donald Trump invoked a separate provision of the Korean War-era law to boost private-sector production of ventilators and other equipment.

But COVID-19 resulted in simultaneous disaster declarations in all states and territories as well as the District of Columbia, and the pandemic presented an unprecedented strain on emergency supplies. Doolin said the voluntary agreement under discussion is intended to streamline the effort in the future.

“Given the scale of that I don’t think it’s surprising that we are trying to be proactive and see how we would be able to plan even better for the next time,” he said in an interview with The Associated Press before the meeting with industry representatives.

It is not the only initiative to improve pandemic response.

Navy Rear Adm. John Polowczyk, who was appointed to run a White House supply chain task force in response to the outbreak, told reporters last week that the government is expanding the emergency stockpile of critical supplies and medicines managed by the Department of Health and Human Services.

Legislation in Congress would require the Department of Homeland Security to increase the amount of personal protective equipment it buys from American companies. The aim is to create incentives to build domestic production.

“The shortage in personal protective equipment during this pandemic underscores the urgent need to shore up our domestic supply chain in case of national emergencies,” said Sen. Jeanne Shaheen, D-N.H., one of the bill’s authors. “The COVID-19 outbreak has exposed severe inadequacies in our PPE supply chain which need to be addressed immediately.”

Under the voluntary agreement, the government would work out a plan for future large-scale acquisitions with suppliers, manufacturers and distributors. Some may be reluctant to participate given concerns about sharing pricing and cost data or other proprietary information.

Industry representatives at the meeting, held by video teleconference, raised issues such as how confidential information will be shared and managed among participants and whether companies based overseas will be able to take part in the agreement.

FEMA officials did not answer questions posed and planned further discussions before the agreement is finalized.

Approval from the Justice Department and the Federal Trade Commission is required to avoid violating antitrust law. This provision of the DPA was used to maintain shipping in 1950 during the Korean War and in 1997 in the Persian Gulf, Doolin said.

FEMA Administrator Peter Gaynor said at the meeting that the goal was to create a “transparent organizing mechanism” to manufacture and distribute supplies in a pandemic.

“Participant manufacturers, distributors and other key private sector partners will be able to work with the federal government, and with each other, on supply chain challenges in a way that would not otherwise be possible,” Gaynor said.

FWBP Staff contributed to this story

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